Why Marvell Technology Crashed Hard in August: The Inside Scoop

Marvell Technology got absolutely hammered last month—here's what went wrong.

Earnings Disaster Strikes

The chipmaker's quarterly numbers missed big time, sending investors scrambling for the exits. Revenue projections? Slashed. Profit margins? Crumbling. The usual Wall Street cheerleaders went silent faster than a crashed trading algorithm.

Supply Chain Nightmares

Global semiconductor shortages finally caught up—Marvell's production lines got squeezed harder than a Bitcoin miner during a power outage. Customers delayed orders, inventories piled up, and the CFO started sweating through those expensive suits.

Institutional Exodus

Big funds dumped shares like hot potatoes—because nothing terrifies money managers more than a growth story hitting sudden turbulence. They'll preach 'long-term vision' but bail at the first whiff of trouble—typical finance hypocrisy wrapped in spreadsheet poetry.

Marvell's not dead—but it's bleeding. The recovery depends on whether they can outmaneuver this perfect storm of operational chaos and investor panic. Meanwhile, Wall Street's already moved on to the next shiny object.

The ASIC business is under scrutiny

In the second quarter, Marvell saw revenue grow 58% to just over $2.0 billion, while adjusted (non-GAAP) earnings per share grew 8% to $0.67 per share. That bottom line figure met analyst expectations, while revenue, despite growing a robust 58%, actually fell a bit short.

Marvell's traditional telecom, consumer, and enterprise business are entering an upcycle after several brutal post-COVID years. Meanwhile, the red hot data center group, which includes the custom ASIC (application specific integrated chip) business and data center networking technology, rallied 69%.

Despite that strong growth, it's that very data center segment that appears to be giving investors pause. Management projected revenue for the current quarter to be approximately flat, which was a bit below estimates. Management justified the weak guidance pointing to "lumpy" ASIC revenue, but it did forecast a reacceleration in that business in the fourth quarter. However, the irregular growth is making investors nervous, especially as rival(AVGO -1.14%) doesn't appear to be having similar issues.

One analyst asked about competition from Tawian's AIchip technologies, which some fear may be taking market share from Marvell's Core ASIC customer,(AMZN 0.11%). CEO Matt Murphy gave an answer that was optimistic about the business long-term, but also didn't specify the competition from that specific customer.

Image source: Getty Images.

Were investors too harsh?

Marvell has traded expensively in the past, but after its recent plunge, Marvell's stock now trades at a more reasonable 23.5 times this year's adjusted earnings estimates.

As a plus, the more attractive AI-oriented data center segment now makes up about 75% of Marvell's business. The downside is that if any competition or margin concerns creep into that business, investors will flock to seemingly safer picks in the space. It appears Marvell will have to prove itself with future AI-related growth to turn the mood around.